When it comes to performance bonds for contractors, the emphasis
is always on getting them. Public work normally requires a performance
bond. If you cannot bond the job, being a well-qualified low bidder is
not enough.
Once the contractor gets the bond, the work commences and they may think they are done with the bonding company. Actually, every bond has its own life cycle. Issuance is the birth-but when and how does it end, and why should the contractor care?
After a job is bonded, the surety may not require any paperwork from the contractor. Sometimes the obligee requires that the surety provide a "Consent to Final Payment" or Release of Retainage. In that case, the underwriter may ask for documentation regarding the health and status of the project. But absent that, the contractor may not think it is necessary to communicate with Surety at the conclusion of the job. Why could it be beneficial?
1. Each bonded contract represents partial use of the contractors' aggregate capacity. By officially closing out the project the surety capacity is restored. This is obviously important to enable the pursuit of new work.
2. From the surety's standpoint, any coverage for the warranty does not commence until the work is accepted and the performance bond is released. It is beneficial for both the contractor and the surety to start, and promptly conclude, the warranty obligation. While outstanding, the warranty is a risk.
3. Third reason involves the payment bond. The recognition claims by suppliers of labor and material is affected by the last date of their supply or performance on the project. Officially closing the contract and performance bond creates a point of reference for evaluation of such claims.
ex•on•er•ate
verb
past tense: exonerated; past participle: exonerated
1. to relieve of a responsibility, obligation, or hardship
2. to clear from accusation or blame
"The results of the DNA fingerprinting finally exonerated the man, but only after he had wasted 10 years of his life in prison."
Closing out the bond file is also important for the surety. It enables them to book any remaining unearned premium and concludes the liability. Both the contractor and Surety are exonerated from the risk/obligation.
What is the procedure to close the bond file?
At the end of the project, whether requested by the surety or not, the contractor should request a letter from the obligee stating that the contract has been completed / accepted and the surety bond is released. The contractor sends this evidence to the bonding company. It's just that simple.
Contractors should assume the responsibility for this action because not all sureties are diligent in requesting closure evidence for their files. It is true that in every case, it is beneficial for the contractor to submit this information to the bonding company.
Exoneration Nation: Be part of it!
Once the contractor gets the bond, the work commences and they may think they are done with the bonding company. Actually, every bond has its own life cycle. Issuance is the birth-but when and how does it end, and why should the contractor care?
After a job is bonded, the surety may not require any paperwork from the contractor. Sometimes the obligee requires that the surety provide a "Consent to Final Payment" or Release of Retainage. In that case, the underwriter may ask for documentation regarding the health and status of the project. But absent that, the contractor may not think it is necessary to communicate with Surety at the conclusion of the job. Why could it be beneficial?
1. Each bonded contract represents partial use of the contractors' aggregate capacity. By officially closing out the project the surety capacity is restored. This is obviously important to enable the pursuit of new work.
2. From the surety's standpoint, any coverage for the warranty does not commence until the work is accepted and the performance bond is released. It is beneficial for both the contractor and the surety to start, and promptly conclude, the warranty obligation. While outstanding, the warranty is a risk.
3. Third reason involves the payment bond. The recognition claims by suppliers of labor and material is affected by the last date of their supply or performance on the project. Officially closing the contract and performance bond creates a point of reference for evaluation of such claims.
ex•on•er•ate
verb
past tense: exonerated; past participle: exonerated
1. to relieve of a responsibility, obligation, or hardship
2. to clear from accusation or blame
"The results of the DNA fingerprinting finally exonerated the man, but only after he had wasted 10 years of his life in prison."
Closing out the bond file is also important for the surety. It enables them to book any remaining unearned premium and concludes the liability. Both the contractor and Surety are exonerated from the risk/obligation.
What is the procedure to close the bond file?
At the end of the project, whether requested by the surety or not, the contractor should request a letter from the obligee stating that the contract has been completed / accepted and the surety bond is released. The contractor sends this evidence to the bonding company. It's just that simple.
Contractors should assume the responsibility for this action because not all sureties are diligent in requesting closure evidence for their files. It is true that in every case, it is beneficial for the contractor to submit this information to the bonding company.
Exoneration Nation: Be part of it!
Steve Golia is an experienced provider of bid and performance
bonds for contractors. For more than 30 years he has specialized in
solving bond problems for contractors, and helping them when others
failed.
The experts at Bonding Pros have the underwriting talent and market access you need. This is coupled with spectacular service and great accessibility.
Contact us today and discuss how you start a new bonding relationship for your company, or increase your current bonding capacity. Call 856-304-7348.
The experts at Bonding Pros have the underwriting talent and market access you need. This is coupled with spectacular service and great accessibility.
Contact us today and discuss how you start a new bonding relationship for your company, or increase your current bonding capacity. Call 856-304-7348.
